How Can You Benefit From Industrial Special Risks Insurance?

Industrial Special Risks Insurance Explained

Industrial special risks insurance (ISR) is an insurance that covers medium to large enterprises against financial losses they might incur because of loss or damage of their physical assets.

Industrial special risks insurance is usually taken out by organisations with insured values of more than $3 million, but this minimum can vary between insurers. Because it is a broad and flexible type of insurance, it is often taken out by organisations wishing to fill in the gaps not covered by other types of insurance they may have.

An industrial special risks insurance policy typically contains a section relating to material loss or damage and a section dealing with consequential loss or business interruption.

If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.

What Does Industrial Special Risks Insurance Cover?

Industrial special risks insurance protects against a wide range of events such as fire, storm, earthquake and criminal acts. As it usually contains open-ended wording, it effectively covers any possible instances of loss or damage that are not excluded or limited in the policy.

It can cover things such as:

loss or damage to premises, plant and machinery and contents, plus property belonging to directors and employees of the company

loss of profits and increased expenses resulting from damage to insured property and damage to property housed with suppliers or customers

burglary, theft and employee dishonesty

accidental damage and glass breakage

costs associated with the removal of debris

costs associated with the re-writing of records

damage to money, other than through embezzlement or negligence by a money carrier.

While industrial special risks insurance will usually cover all of these events and more, it is the exclusions or endorsements that are included in relation to these events that differentiate ISR policies. These could include:

an endorsement excluding drinking glasses in relation to cover for accidental glass breakage

an endorsement excluding cover for burglary where the alarm was not switched on

an endorsement excluding cover for money damage that is not reported within a certain time frame.

For this reason, it is vital that an organisation reads and understands the wording in an industrial special risks insurance policy (particularly the exclusions) and has the policy tailored to suit their own particular business needs.

Who Needs Industrial Special Risks Insurance?

The word ‘industrial’ is somewhat misleading in the name industrial special risks insurance because it appears to be a form of insurance for manufacturers or factory owners. In reality, industrial special risks insurance is actually a form of cover for a wide range of organisations in a variety of industries.

As previously stated, industrial special risks insurance is most suitable for medium to large organisations with insured values of around $3 million. This requirement may vary, with some insurers requiring a minimum of $2 million, while others specify at least $5 million.

In general, ISR insurance is most useful to those organisations that have high asset values and/or multiple business locations and multiple occupation classes.

How to Calculate Your Industrial Special Risks Insurance Premium

Insurers use a variety of factors to determine the amount an organisation will pay for industrial special risks insurance.

Typical considerations would include things such as:

the nature of the activities being carried out at the organisation’s premises

the materials used in the construction of the premises

the overall value of the premises

the organisation’s previous insurance and claims history.

As with any insurance policy, the level of perceived risk is the main determining factor of price and extent of cover. The higher the level of risk to the insurer, the more the organisation will pay for cover.

Commonwealth and state taxes may also be included in the premium and it is worth noting that excesses are usually higher with ISR insurance, often beginning at around $1,000.

What is Material Loss or Damage?

An industrial special risks insurance policy usually contains a section dealing with material loss or damage and another with consequential loss or business interruption.

Material loss or damage refers to loss or damage of property or personal property insured by the organisation at the time of the incident. A typical ISR policy will define the indemnity (the cover provided), the property insured and the basis of settlement.

Indemnity

Indemnity may include compensation for loss or damage of the property, costs associated with reinstating the property, government fees payable prior to reinstatement, firefighting costs, temporary property protection costs, demolition and debris removal costs, costs of damage to equipment belonging to directors and employees, costs associated with monies owing that cannot be collected due to the destruction of records.

Property insured

Property insured includes property owned by the organisation, property for which it is responsible, property that has been purchased by the organisation where transfer of title is still pending, personal property including monies belonging to the organisation.

Basis of settlement

Basis of settlement refers to the cost of replacement (based on current value), reinstatement or repair of the property and contents such as raw materials, goods under manufacture, finished goods, company records and calculated monthly accounts receivable.

What is Covered by Consequential Loss?

The other section dealt with in industrial special risks insurance is the section dealing with consequential loss. Consequential loss covers loss of profit and other financial losses that occur as a result of an interruption to normal business operations after an incident.

In this section, a typical ISR policy will define the indemnity (the cover provided) and the basis of settlement.

Indemnity

The indemnity covers things such as the costs associated with an interruption to business in accordance with the basis of settlement, providing that the property was insured against material loss or damage at the time of the incident.

Basis of settlement

Basis of settlement can be limited to the loss of gross profit due to a reduction in turnover and the increased cost of working to avoid a reduction in turnover, as well as the cost of claim preparation and loss relating to pay-roll.

Industrial Special Risks Insurance Exclusions

As mentioned previously, due to its broad nature, industrial special risks insurance will cover almost any clause that is not specifically excluded in the policy. Hence there are often a number of exclusions and the following are just some of those found in a typical ISR policy.

Property Exclusions

various kinds of piping such as sewer pipes, gas pipes, irrigation pipes and most water pipes

foundations for machinery

any vehicles or mobile equipment being driven on a public thoroughfare

any aircraft or marine vessel

any machinery such as cranes, hoists, elevators, conveyors or power shovels

any computers or data processing equipment

any machine that uses radioactive materials and radio and television apparatus

any steam or gas turbine

any generator unit exceeding 250 horsepower

any wiring or fittings used for lighting or electricity.

Perils Exclusions

any damage arising from wear and tear or general deterioration

any damage resulting from repairs or renewal of certain parts

any damage resulting from intentional exposure of machinery to abnormal conditions

any damage resulting from faults or defects that were known to the insured.

Apply for Industrial Special Risks Insurance

An industrial special risks insurance policy is sometimes called an 'all-risks' policy because of its perceived broad coverage of a lot of different risks. However, the truth is that most ISR policies contain a number of exclusions such as those mentioned here that can substantially limit the extent of the cover provided. As a result, an organisation may find that it requires additional property policies to supplement their industrial special risks insurance.

Richard is the Insurance Editor at finder, and has been wrangling insurance Product Disclosure Statements for the last 4 years. When he’s not helping Aussies make sense of the fine print, he can be found testing the quality of Aperol Spritzes in his new found home of New York. Richard studied Journalism at Macquarie University and The Missouri School of Journalism, and has a Tier 1 certification in General Advice for Life Insurance. He has also been published in CSO Australia and Dynamic Business.

Related Posts

Aon, a global insurance company with a wealth of experience, offers professional indemnity insurance cover to suit an extensive range of professions.
Cover can be tailored to suit your particular needs and offers much-needed financial protection for professionals. Public and product liability cover is also available.
To find out more about Aon’s professional indemnity insurance and other insurance products, read this article.

Why do accountants need professional indemnity insurance? Why do they need public liability insurance? This article looks at the many risks that accountants are exposed to in the course of doing business and will hopefully convince every accountant who reads it that PI Insurance is not something they can afford to be without.

Ask an Expert

Do not enter personal information (eg. surname, phone number, bank
details) as your question will be made public

finder.com.au is a financial comparison and information service, not a bank or
product provider

We cannot provide you with personal advice or recommendations

Your answer might already be waiting – check previous questions
below to see if yours has already been asked

Your Question

Subscribe to the Finder newsletter for the latest money tips and tricks

Notify me via email when there is a reply

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.

Disclaimer - Hive Empire Pty Ltd (trading as finder.com.au, ABN: 18 118 785 121) provides factual information, general advice and services on financial products as a Corporate Authorised Representative (432664) of Advice Evolution Pty Ltd AFSL 342880. Please refer to our FSG - Financial Products. We also provide general advice on credit products under our own Credit Licence ACL 385509. Please refer to our Credit Guide for more information. We can also provide you with general advice and factual information on about a range of other products, services and providers. We are also a Corporate Authorised Representative of Countrywide Tolstrup Financial Services Group Pty Ltd. ABN 51 586 953 292 AFSL 244436 for the provision of general insurance products. Please refer to our FSG - General Insurance. We hope that the information and general advice we can provide will help you make a more informed decision. We are not owned by any Bank or Insurer and we are not a product issuer or a credit provider. Although we cover a wide range of products, providers and services we don't cover every product, provider or service available in the market so there may be other options available to you. We also don't recommend specific products, services or providers. If you decide to apply for a product or service through our website you will be dealing directly with the provider of that product or service and not with us. We endeavour to ensure that the information on this site is current and accurate but you should confirm any information with the product or service provider and read the information they can provide. If you are unsure you should get independent advice before you apply for any product or commit to any plan. (c) 2018.

Feedback

How likely would you be to recommend finder to a friend or colleague?

0

1

2

3

4

5

6

7

8

9

10

Very UnlikelyExtremely Likely

Required

Required

Required

Optional, only if you want us to follow up with you.

By submitting your email, you agree to the finder.com.au Privacy Policy

Thank you for your feedback.

Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.

Important information about this website

finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.

finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.

Products marked as 'Promoted' or "Advertisement" are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options and find the best option for you.

The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.

Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.

We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.

Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.

Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.

Please read our website terms of use for more information about our services and our approach to privacy.